RONNIE WHEELER AND EVELYN DUCKER WHEELER v. JOEL D. REDWINE; CAROLYN K. HUGHES; COUNTY OF GARRARD; AND MIKE COTTRELL
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RENDERED: JANUARY 28, 2000; 2:00 p.m.
NOT TO BE PUBLISHED
C ommonwealth O f K entucky
C ourt O f A ppeals
NO.
1998-CA-002989-MR
RONNIE WHEELER AND
EVELYN DUCKER WHEELER
APPELLANTS
APPEAL FROM GARRARD CIRCUIT COURT
HONORABLE ROBERT J. JACKSON, JUDGE
ACTION NO. 1995-CI-00008
v.
JOEL D. REDWINE; CAROLYN K. HUGHES;
COUNTY OF GARRARD; AND MIKE COTTRELL
& ASSOCIATES, INC.
APPELLEES
OPINION
VACATING AND REMANDING
** ** ** ** **
BEFORE: BUCKINGHAM, KNOPF, AND McANULTY, JUDGES.
KNOPF, JUDGE:
Ronnie Wheeler and his wife, Evelyn Ducker
Wheeler, appeal from a November 4, 1998, summary judgment of the
Garrard Circuit Court ordering that a parcel of real estate be
sold and the proceeds applied to tax liens and a mortgage affixed
to the property.
Appellees Joel Redwine and Carol Hughes hold
the liens and mortgage.
The Wheelers maintain that the trial
court applied an excessive portion of the proceeds to the
mortgage.
Being unable to say with the requisite certainty that
there is no material factual dispute on this issue, we are
obliged to vacate the trial court’s judgment and remand for
additional proceedings.
In 1977 Ronnie Wheeler owned a small, unimproved parcel
of Garrard County real estate.
During that year he borrowed
money from the First National Bank of Nicholasville, Kentucky, to
purchase an automobile.
In exchange for the loan, Wheeler gave
the bank a promissory note for the principle (approximately
$3,000.00 at the time of default) and interest (19.06%), a
security interest in the automobile, and a mortgage on the
Garrard County property.
Wheeler defaulted on the note in 1983
and soon thereafter sought and was awarded relief under Chapter 7
of the bankruptcy code.
11 U.S.C. § 701 et seq.
Persuaded,
perhaps, that Wheeler’s unimproved realty did not promise a
sufficient return to justify foreclosure, the bank took no action
to enforce its mortgage.
Nor did Wheeler, who apparently
believed that the mortgage had been removed by his bankruptcy
discharge, do anything to disencumber the property.
matter stood until 1994.
So the
During that year, prior, apparently, to
learning of the appellees’ claims, Wheeler began building a
residence on the Garrard County property.
In December 1994, the
appellees purchased the mortgage from First National Bank for
$100.00.
They then brought suit to enforce their mortgage in
January 1995.1
1
The appellees had also purchased several certificates of
tax delinquency on the property. Their suit sought recovery on
that basis as well. The Wheelers acknowledge their liability for
the delinquent taxes, and that aspect of the case plays no part
in this appeal.
-2-
We need not relate in detail the convoluted history of
the appellees’ suit, which is before this Court now for the
second time.
It suffices to note two facts.
First, in their
initial motion for summary judgment, the appellees discussed
their mortgage-based claim as follows:
However, Defendant Ronnie Wheeler has
commenced construction on the subject
property and it is no longer an undeveloped
one-half acre. In the interest of equity,
the plaintiffs suggest to the Court that the
value of the property in 1994, prior to
commencement of the construction, be set at
$2,500.00 which is the value of the property
in 1994 for tax assessment purposes. . . .
The plaintiffs could then be awarded what
they were due under law, the value of the
unimproved land, and the defendant would not
suffer undue hardship since he has improved
the land during the litigation period.
Second, in 1997, with the appellees’ summary judgment
motion pending, Wheeler reopened his bankruptcy case.
He
objected to the appellees’ claim and sought an order compelling
the appellees to release the mortgage for $500.00, the alleged
value of the real estate in 1983 at the time of the original
bankruptcy proceeding.
Denying this relief, the bankruptcy court
explained that, “[t]he mortgage, which the herein creditors hold
as assignees, survived as an enforceable consensual mortgage
lien, the discharge of the debtor.”
The bankruptcy court went on
to rule that
creditors Redwine and Hughes hold a valid
secured claim in the amount of $32,175.88 as
of the date of filing of their proof of
claim, plus interest. Of this amount,
$31,591.98 derives from the assigned
mortgage. Their proof of claim is allowed in
full with interest as provided by the
underlying note . . . .
-3-
When the bankruptcy stay was lifted, the circuit court
proceeding resumed.
Wheeler maintained that the appellees’
recovery pursuant to the mortgage should be limited to the
$2,500.00 they had requested in their original motion; Redwine
and Hughes maintained that, under the bankruptcy court’s ruling,
they were entitled to the full value of the outstanding note plus
interest (increased since the bankruptcy court’s ruling to
approximately $40,000.00).
appellees.
The circuit court agreed with the
In granting their (implicitly modified) motion for
summary judgment and ordering the property to be sold, it ruled
that collateral estoppel precluded any reconsideration of the
claim’s value.
It also ruled that the appellees’ prior request
for only $2,500.00 did not constitute a “judicial admission”
limiting the amount they could recover.
Redwine and Hughes, the
only bidders, purchased the property at a commissioner’s sale in
December 1998 for the amount then due under the note.
Because summary judgments involve no fact finding, this
Court reviews such judgments de novo, in the sense that we owe no
deference to the conclusions of the trial court.
As did the
trial court, we ask whether material facts are in dispute and
whether the party moving for judgment is clearly entitled thereto
as a matter of law.
Under this state’s rules of practice,
summary judgments are to be granted cautiously; they are
appropriate only when it appears impossible for the non-movant to
prove facts establishing a right to relief or release, as the
case may be.
Steelvest, Inc. v. Scansteel Service Center, Inc.,
-4-
Ky., 807 S.W.2d 476 (1991).
For the following reasons, we are
concerned that here this strict standard has not yet been met.
Our concern focuses on what seems to be an ambiguous
use of the word “claim” in the parties’ briefs and in the trial
court’s judgment.
On the one hand, as the bankruptcy court held
and as the appellees insist, Wheeler’s note-based liability to
the bank, the bank’s “claim,” was not extinguished by Wheeler’s
discharge in bankruptcy.
The discharge only precluded the bank
from enforcing its claim against Wheeler personally.
The
mortgage, however, survived the bankruptcy, so that the “claim,”
calculated according to the terms of the note, remained
enforceable against whatever property was encumbered thereby.
In
re Willis, 199 B.R. 153 (B.W.D.Ky. 1995); In re Hornlein, 130
B.R. 600 (B.M.D.Fla. 1991).
In this sense, the value of the
“claim” was indeed determined by the bankruptcy court, and we
agree with the trial court that Wheeler, who did not appeal the
bankruptcy court’s ruling, is collaterally estopped from
challenging that valuation.
Moore v. Commonwealth of Kentucky,
Cabinet for Human Resources, Ky., 954 S.W.2d 317 (1997); Herring
Mining Company v. Roberts Brothers Coal Company, Inc., Ky. App.,
747 S.W.2d 616 (1988).
On the other hand, as a practical matter the appellees’
“claim” is limited by the value of the collateral against which
the claim may be asserted, and that value in turn depends upon a
determination of what the collateral is.
did not address that question.
The bankruptcy court
Consequently, collateral estoppel
does not bar Wheeler from challenging the “claim” in this sense.
-5-
Sedley v. City of West Buechel, Ky., 461 S.W.2d 556 (1971).
Wheeler contends that the mortgage encumbers his lot but not the
residence added thereto.
He insists that the appellees have
admitted as much and should be bound by their admission, and
further that their admission was incorporated in the judgment
that preceded the first appeal of this matter and thus has become
res judicata.
This second argument need not detain us, for the
first appeal was dismissed upon the determination that the prior
judgment was interlocutory, not final, and the doctrine of res
judicata applies only to final judgments.
Cartmell v. Urban
Renewal and Community Development Agency of the City of
Maysville, Ky., 419 S.W.2d 719 (1967).
Wheeler’s other assertion, however--that the dwelling
is not encumbered by the mortgage and that the appellees have
admitted this--presents a more difficult question.
To be sure,
such a mortgage would represent a deviation from standard
practice, according to which a mortgage on real property
attaches, as a general rule, to improvements added at a later
date.
Kentucky Lumber & Mill Work Co. v. Kentucky Title Savings,
184 Ky. 244, 211 S.W. 765 (1919); Miladin v. Istrate, 119 N.E.2d
12 (Ind. 1954).
By itself, furthermore, the portion of the
appellees’ summary judgment motion quoted above does not amount
to a binding judicial admission that the mortgage should be
construed as Wheeler would have it.
The quoted portion of the
appellees’ motion seems to have been intended more as a
demonstration of appellees’ “reasonableness” and “good faith”
than as a testamentary concession.
-6-
And it addressed gratuitously
an evidentiary matter with regard to which the appellees are not
likely to have intended a waiver.
In these circumstances, the
presumption against judicial admissions is controlling.
Goldsmith v. Allied Building Components, Inc., Ky., 833 S.W.2d
378 (1992); Sutherland v. Davis, 286 Ky. 743 , 151 S.W.2d 1021
(1941).
Nevertheless, it cannot be denied that the appellees’
plea for relief in their summary judgment motion is significantly
inconsistent with the position they now maintain.
Nor is
Wheeler’s assertion about the mortgage a legal impossibility.
Upon further development, the facts could conceivably justify a
finding that the mortgage was not intended to apply to Wheeler’s
dwelling, or that the appellees pursued it with that
understanding.
This possibility, the unusual equities created by
the true creditor’s virtual abandonment of its claim and by the
long period during which the claim lay dormant, and the further
possibility that the trial court deemed itself precluded by the
bankruptcy court’s ruling from critically assessing Wheeler’s
mortgage and the appellees’ pleading in regard thereto, lead us
to conclude that summary judgment was premature.
Wheeler’s mortgage must be addressed.
The scope of
Accordingly, we vacate
the November 4, 1998, judgment of the Garrard Circuit Court and
remand for additional proceedings consistent herewith.
McANULTY, JUDGE, CONCURS.
BUCKINGHAM, JUDGE, CONCURS IN RESULT.
-7-
BRIEF AND ORAL ARGUMENT FOR
APPELLANTS:
BRIEF AND ORAL ARGUMENT FOR
APPELLEES REDWINE AND HUGHES:
Robert L. Gullette, Jr.
Gullette & Gullette
Nicholasville,Kentucky
James T. Redwine
Covington, Kentucky
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